GDP growth hits 3 Year low 5.7% in Q1

According to the SBI report growth of manufacturing and service sectors may turn out weak in the July September quarter

Sanjeev Jain, Associate Vice President of Ashika Stock Broking said, "Q1FY18 GDP data has disappointed the market".

However, in a silver lining for Asia's third-largest economy, the services sector gathered steam, posting a growth of 8.7 percent in the latest quarter, up from 7.2 percent in the previous three months. That's a big drop from the quarter before and much slower than the 7.1% growth it recorded in the same period past year. GDP has been falling for the last six quarters.”. Demonetisation, it says, has brought the country's currency in circulation to GDP ratio at par with with advanced economies like Germany and France. The Congress party - which had been steadfast in its criticism of demonetisation and also the manner in which the GST rollout took place - has expectedly hit out at the Centre for the slump in the GDP growth figures. Agriculture, growing at 2.3% could match up to 2.5% seen in the corresponding quarter previous year. Farm sector growth was a modest 0.3 percent versus last year's 9.9 percent.

"Growth numbers indicate a moderation in agriculture and industrial sectors".

"The major reason for slowdown in growth at 5.7 per cent is on account of manufacturing, where Gross Value Added (GVA) is largely contributed by the private sector".

"IIP growth for the quarter and corporate earnings were also much muted for this quarter which weighed on the print", it added. Additional impact is expected to arise from scaling down of capital spending by the state governments to accommodate farm loan waivers. The sharp dip we have seen now is not 5.7. Meanwhile, the services sector saw a rebound led by growth in the "trade, hotels and transport" sub segment.

However, confusion among some firms over a new tax on goods and services was blamed for holding back growth.

"The negative effects of demonetization are going to last at least another year, if not longer".

Anjali Verma, Economist, Phillipcapital Inida, Mumbai said, "The impact of demonetisation has faded, definitely".

But there are deeper problems that needs proper twerking in India. So that could be one thing. "There is a need to focus on the quality of growth rather than quantity, and for this we can afford to loosen our fiscal deficit target, spend more on investments rather than depend only on consumption to fuel growth". "The black spot remains investment". Even on a sequential basis, the Gross Domestic Product (GDP) growth was 6.1 per cent in the preceding quarter.

Admitting the slowdown of the economy, Finance Minister Arun Jaitley on Thursday said that India's Gross Domestic Product (GDP) growth rate at 5.7 per cent in Q1 is a matter of concern.

# Electricity growth up 7% from 6.1%.

Overall, SBI expect FY18 GVA growth to be around 6.5% with a downward bias.



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